SME Financing Research Articles

The SMEs Funding Decisions through the Islamic Equity Crowdfunding Platform

Islamic Equity Crowdfunding is currently an alternative sharia-based financing for SMEs. In Indonesia, the Islamic Equity Crowdfunding platform began to appear in 2021, and has been growing until now. The purpose of this study is to analyze the factors that influence the funding decision of SMEs in the Halal Food Industry through the Islamic Equity Crowdfunding platform. Data was collected from SMEs in Indonesia by surveying 200 respondents, namely businesses in halal food. In this study the data obtained will be analyzed using the partial least squares technique which refers to the theory of planned behavior. The results showed that the decision of SMEs in seeking funding through Islamic Equity Crowdfunding was influenced by Subjective Norms, Perceived Behavioral Control, Product Knowledge, and Religiosity, but Intention was not influenced by Attitude.
 

Impact of Financial Literacy on Access to Finance: Does Risk Attitude Matter?

The purpose of the paper was to assess the effect of financial literacy on the access to finance of SMEs. Thus, the study examined the effect of financial literacy on SMEs’ access to finance in developing economies. Data for the study was collected from SME owners/managers in Ghana through questionnaires. 396 questionnaires were analyzed. The Partial Least Square Structural Equation Modelling (PLS-SEM) was used as the main analytical tool. The study found a significant positive association between financial literacy and access to finance. Financial literacy also had a positive significant effect on risk attitude, whereas the link between risk attitude and access to finance was also found significant. Again, the study showed that risk attitude matters in the nexus between financial literacy and access to finance, as it was found to mediate the link between financial literacy and access to finance. Our findings affirm the dual process theory of reasoning where an entrepreneur’s decision to access finance is guided by two systems of thinking: the automatic unconscious system based on their risk attitude, and the deliberate conscious system where different considerations and models are weighed up based on their financial literacy, both of which serves to magnify or dampen rational decision-making to access business financing. The findings also affirm the Knowledge base view theory (KBV) that, financial literacy is a special strategic asset organizations can use to obtain a competitive advantage over competitors. Practically, SMEs will be encouraged to improve their financial literacy and risk attitude skills.

Intelligent SME Financing Risk Control Platform Algorithm Based on Intelligent Internet Financial Architecture

Due to their poor conditions and the high loan threshold of banks, small and medium-sized enterprises are faced with the problem of difficult and expensive financing. With the rapid development of Internet finance, small and medium-sized enterprises can use Internet finance to obtain higher transparency, higher participation, and lower intermediate costs. It provides a certain reference for the development of SME financing model in the future. It further diversifies the financing channels of SMEs and facilitates the financing process, and finally puts forward countermeasures and suggestions based on the problems that may arise in the process of Internet financing.

Does SME’s financing decisions follow pecking order pattern? The role of financial literacy, risk preference, and home bias in SME financing decisions

This paper aims to explore the role of financial literacy, risk preference, and home bias in Minangkabau ethnic SME financing decisions, and whether their financing pattern follow the pecking order theory. The theoretical framework model was developed to determine the impact of financial literacy, risk preference, and home bias on the financing decisions of SMEs. The study applied the SEM-PLS method in testing the model. Data collection was carried out through online and offline survey techniques with a sample of 623 SMEs. The results reveal that home bias and risk preference have a negative direct effect on financing decision. Home bias also has a direct positive influence on risk preference. Financial literacy can minimize home bias from negative to positive toward financing decision. However, financial literacy does not have a direct effect on the financing decisions and does not have a significant direct influence on risk preference. Most SMEs have a low level of financial literacy, a high tendency for home bias and a high-risk preference. Financial literacy has strong positive moderation effect on the influence of home bias toward financing decision. Home bias make SME financing decision does not follow pecking order pattern. As SMEs financial literacy level is still very low, thus it is important for financial institutions to educate SMEs by providing several trainings about financial matters. The findings suggest to improve the financial literacy of SMEs informal association groups in order to help them reducing their home bias tendency. This study seeks to explore the pecking order pattern in financing decisions of SMEs.

EXPLORING THE RELATIONSHIP BETWEEN SMEs FINANCING AND ENTREPRENEURS’ PERCEPTIONS ON THE DEVELOPMENT OF THE HOSPITALITY INDUSTRY IN SYLHET

By serving and gratifying clients, the hospitality business has a significant potential to stimulate economic growth and to increase shareholder wealth. The study's primary goal is to examine how SME financing has affected Bangladesh's growing hotel sector. Growth in services and jobs are important SMHE development determinants. The theoretical model displays how the researcher has conceptualized the relationships between the study's variables. We employed factor analysis, test of hypothesis, and descriptive analysis to conduct quantitative analysis for this paper using SPSS. In this work, both primary and secondary data have been utilized. Primary data collection will be done in the Sylhet districts (Sadar) utilizing standardized questionnaires that will concentrate on the borrower's perspective of SME funding. Secondary data was gathered from academic journals, theoretical evaluations of SME foundations, papers, Bangladesh Bank magazine reviews, and BBS reports. A survey will be undertaken to obtain feedback from the owners or managers of various hotels, restaurants, and managed food services in the districts of Sylhet (Sadar). The study found a strong correlation between organizational behavior measures and SME finance. This study also poses the possibility that the Sylhet region's hotel sector could improve its performance through smart SME financing. The study also suggested potential future uses of SME finance in hospitality firms in the Sylhet region. The framework includes the impact of SME financing on revenue, job growth, and their ‘customers.

Mapping Of SMEs Digital Financial Transformation Research: A Bibliometric Analysis

With regard to keywords, research sites and topics, as well as the research methodologies, this study intends to carefully assess international scientific articles for SMEs Digital Financial Transformation research. Four key conclusions are presented in this study after reviewing 362 scientific papers. The main theme turns out to be the significance of digital financing for SMEs, which is followed by themes pertaining to digital transformation. Second, the most often utilized data sets are exploratory and case studies. Third, approximately the same number of studies have been conducted on the digital financial transformation of SMEs in developed and developing nations. Fourth, other study goals were suggested based on bibliometric methods with VOSviewer, which were divided into four groups and tested these themes to elaborate on theoretical and methodological elements. The future development of SMEs' digital financial transformation will be furthered by investigating this issue.

Analyzing Small and Medium Enterprises’ Perception towards Private Equity as an Alternative Source of Finance in Lusaka District

As guided by the Capital Structure theory, in order to obtain external financing, SMEs may either select debt type of financing or equity type of financing. Since the typical SME cannot meet the requirements to be listed on the Lusaka Stock Exchange, Private Equity remains an attainable source of finance for SMEs who do not want to be financed with debt. This study aimed to analyse the perceptual preference of private equity as an alternative source of financing for SMEs. To meet this objective, an assessment was conducted on the preference of Private Equity to Debt finance. Further, the perception of SMEs towards private equity was explored and themes that influenced the various perception were investigated. A qualitative study was undertaken to meet the above-mentioned objectives. The study employed a grounded theory approach and interviews were used as the primary data collection tool. Fifty-five (55) SMEs who hold accounts with Zambia Industrial Commercial Bank under the Wholesale and Retail trade industrial sector were interviewed and a purposive sampling method was used. From the interviews conducted, the emerging theme was SMEs preferred private equity finance to debt finance mainly in cases where the SMEs interviewed were faced with economic uncertainty, limited collateral, intended to grow quickly, and required technical assistance. However, loss of control, lack of a legal framework and unavailability of Private Equity firms in Lusaka hindered SMEs from utilizing this type of financing. This finding is derived from SMEs preference to Private Equity over debt finance and a largely positive perception SMEs have towards Private Equity finance. Negative perceptions of Private Equity were also noted. This study, therefore, went further to analyse both the factors that influence positive and negative perceptions. These factors included technical assistance, loss of control, payment mechanisms, and duration of the financing methods. The conclusion drawn from this study is that Private Equity is preferred to debt finance because of the lack of high-interest rates and collateral requirements for Private Equity. This study also concludes that there are mainly positive attributes to private equity, though negative perceptions also exist. Loss of control, decision-making concerns, technical assistance, lack of availability of this type of finance, repayment mechanisms, and non-requirement of collateral were noted as factors that were attributed to the conflicting perceptions of SMEs towards Private Equity. Due to this situation, it is recommended that Financial Services Providers take a keen interest in this mode of financing as there is a potential market in this field. Additionally, it is recommended that researchers may focus on conducting a feasibility study to extend the mandate of firms that have been historically providing debt to also include Private Equity Finance for SMEs. Lastly, it is proposed that studies are carried out to assess the legal landscape of Private Equity in Zambia. KEYWORDS:

E-commerce supply chain finance for SMEs: the role of green innovation

ABSTRACT This paper investigates the impacts of e-commerce supply chain finance (SCF) on small and medium enterprises’ (SMEs) financing performance. Using the 423 observations panel dataset of Chinese technology-based SMEs for the period from 2011 to 2020, the descriptive, correlation statistics and regression analysis are conducted. The findings indicate that e-commerce SCF platforms facilitate SME financing by increasing the coverage breadth and usage depth. Particularly, we found that comparing to e-commerce SCF usage depth, the coverage breadth has more positive impacts on SMEs’ financing performance. In addition, this research also reveals the positive moderating effects of green innovation on this relation. The results of the study empirically demonstrate how SCF platforms could better help SME satisfy their financing needs.

Digital Transformation of Commercial Banks, Monetary Policy Transmission Efficiency and SME Financing: Empirical Evidence from the Chinese Market

Digital Transformation of Commercial Banks, Monetary Policy Transmission Efficiency and SME Financing: Empirical Evidence from the Chinese Market

Internationalization and bank financing of French SMEs

Cette étude examine l’impact de l’internationalisation des PME françaises sur leur financement bancaire. Plus spécifiquement, nous étudions empiriquement les conséquences de l’internationalisation par l’export et la filiale sur le ratio d’endettement bancaire. En s’appuyant sur un échantillon de PME, nos résultats montrent que les PME exportatrices ont plus de difficultés à obtenir des dettes bancaires contrairement à celles qui ont des filiales à l’étranger. Nous constatons également que l’intensité d’exportation des PME est négativement associée à leurs ratios d’endettement bancaire. En outre, nos résultats montrent aussi que la proximité géographique des filiales étrangères avec leurs maisons mères est positivement associée au ratio d’endettement bancaire. En fin, notre recherche suggère que chaque mode d’internationalisation conduit à des comportements de financement différents.

An Evaluation of the Determinants of Venture Capital Financing of Small and Medium Scale Enterprises in Nigeria

This study investigated the determinants of venture capital firms’ decision to finance small and medium scale enterprises in Nigeria. The basic objectives were to identify and analyse the factors that determine venture capital financing of small and medium scale enterprises in Nigeria.It was hypothesized that there was no significant factor that determined venture capital financing of SMEs. The population of study comprised 7474 SMEs in southwestern Nigeria that registered with Corporate Affairs Commission. Purposive sampling was used to choose two states, namely Lagos and Oyo that had the largest percentage (79.3%) of registered SMEs in Southwestern Nigeria. Slovin’s formula was used to select 374 SMEs in the states using population proportionate to size.The findings of the investigation showed that Profit, growth potential, Corporate Governance, Government Policies and Business Plan were the significant factors that determined venture capital financing of small and medium scale enterprises in southwestern Nigeria. It was recommended that SMEs should acquaint themselves with the factors that determine venture capital firms’ financing and provide the necessary business environment that will attract equity finance from venture capital firms. Equally, venture capital firms were advised to shift emphasis from profit making to long term goals like business size, investor protection and entrepreneurial experience which will ensure the survival of SMEs and benefit all stakeholders.

Innovative Activity and Access to Finance of SMEs: Views and Agenda

A rapidly growing body of research applies survey methods to examine the ability of SMEs to obtain external financing. These studies focus on firm-specific characteristics and demonstrate the impact of such ability on their own growth and overall economic growth, among other outcomes. However, the use of external financing is of crucial importance, especially whether SMEs can adopt innovation when they succeed in getting a loan. This paper reviews this literature that is not as extensive as the one focusing on typical investments with two purposes. First, we summarize recent work, providing a guide to its methodologies, datasets, and findings. Second, we consider applications of the literature in innovation, including insights for policymakers that seek to assess the potential economic effects of investments in innovation.

Practical Validation in a Neutrosophic Environment of the NEBS Methodology for the Optimization of SME Financing through Machine Learning

Micro and small enterprises (MSEs) have generated great opportunities for the growth of countries in the Latin American region. Unfortunately, as a result of the global crisis caused by the Sar-Cov-2, MSEs were severely affected. The main objective of this investigation is to validate in a practical way in a neutrosophic environment the use of a predictive Machine Learning technique that demonstrates the probability of the return on investment that a candidate investor will obtain with respect to a given business plan. With them it is expected that the investor can make the decision to finance a MSE, with the positive decision will close gaps in the growth of micro and small enterprises in Peru. The research is descriptive and predictive, with a research design of post-test only and control group. Neutrosophic TOPSIS was used as a technique. NEBS turns out to be efficient for the applicability of Machine Learning by obtaining statistical evidence to accept the hypotheses proposed for the finance sector in micro and small en-terprises in Peru. The results showed that the use of Machine Learning is validated, and its implementation increases the amount of financing obtained, decreases the evaluation time of requirements, reduces the number of complaints, and increases the number of formal sources used. Machine Learning research should be continued due to the complexity of this technology, which is con-stantly evolving.…

Research on SME Financing Strategy Based on Enterprise Life Cycle

The strategic management of enterprise financing plays a decisive role in enterprise management, especially the survival and rise and fall of small and medium-sized enterprises. According to the life cycle theory of enterprises, this paper divides the financial financing strategy management of SMEs into financing strategies in the start-up stage, financing strategies in the growth stage, financing strategies in the mature period and financing strategies in the recession period, and analyzes the different environments faced by SMEs in different life cycles and the characteristics of different stages of their life cycles, providing solutions for SMEs to develop financing strategies based on the life cycle of the enterprise.

Practical path of SME financing problems from the perspective of fintech

The financing difficulties of small and medium-sized enterprises have always been the main obstacle in the growth process of small and medium-sized enterprises. Meanwhile, the trial and error costs hidden in different stages of development in the growth process of small and medium-sized enterprises are also hindering the development of enterprises. This paper analyzes the enterprise side factors of financing difficulties of small and medium-sized enterprises and the different growth stages of small and medium-sized enterprises that may generate large trial and error costs, and puts forward the scheme of using fintech to alleviate the financing constraints of small and medium-sized enterprises and reduce the trial and error costs of small and medium-sized enterprises from the aspects of enterprises, banks and governments.

PEER-TO-PEER LENDERS AND BANKS: COMPETE OR COMPLEMENT? A POSITION PAPER

This paper is a position paper that aims to identify whether the presence of P2P lending is a problem for banking companies or vice versa. We answer this question through three approaches: in terms of business models, SWOT analysis, the risks faced by them, and market segmentation. Our identification shows that due to its easy communication channel (the Internet) and affordable infrastructure, P2P lenders are a competitive rival. P2P lenders should move to a niche market that is still available, namely SME financing. These SMEs are then expected to become more mature and bankable so that they can get financing from banks to grow bigger. They have qualified capabilities for this segment and capable technology. This could be their competitive advantage over banks. Banks operate in safe segments for them to avoid bank panics, bank runs, and economic instability. Meanwhile, banks can engage in other market segments, such as housing finance, commercial, and corporate financing. This synergy will have a harmonious impact on economic progress.

Financial impact of cost of capital on tourism-based SMEs in COVID-19: implications for tourism disruption mitigation.

Opportunities for funding TourismSMEs are emerging globally due to the expansion of tourismsector. However, it is still being determined how these financial arrangements will be controlled at more significant sizes equitably. In the contemporary period, E7 economy is deficient in producing the financial resources to ensure the availability of funds for the acquisition of funds for tourism-based SMEs. However, this research tested the empirical position of cost of debt in E-7 economies during COVID-19 crises. Study findings have shown significant outcomes between the constructs. The variation of conditions, structural uncertainty, transection systems, and variation in support by the financial institution for tourism-based SMEs are the main reasons that lessen borrowing and lending system of funds, from banks to SMEs. However, theorists must revisit the transaction system of debt financing for SMEs. Policymakers are suggested to develop viable and SME system-friendly policies to finance through debt capital from the banks in the time of structural imposed crises, like COVID-19.

Effectiveness of the Lusaka Stock Exchange Alternative-Market in Capital Finance for SME's in Zambia

This research carried out an assessment of the effectiveness of the Lusaka Stock Exchange (LUSE) Alternative-Market in Capital Finance for SME's. The research was designed under a broadly realist paradigm. In this study, a deductive approach was used. The research was quantitative in nature incorporating a descriptive design. The research targeted 53 SMEs that were oriented by DBZ with regards to listing on the Alt-M and all of them were incorporated in the study. A structured questionnaire was used as a data collection tool. To analyse primary data, SPSS version 25 was used. The results indicate that SME capital finance is positively significantly correlated (all sig. ≤ 0.01) with each direct mechanism of financing (r = 0.666) and indirect mechanism of financing (r = 0.613). The study concluded that as its Alt-M was not effective but has the potential of meeting its objectives provided it manages to have SMEs listed. The positive association recorded with the study variables gives an indication that despite the challenges that are associated with the alternative market, it has the capacity of being effective in capital financing for SMEs. It was recommended that LuSE should engage with key stakeholders to revise the listing rules to encourage a number of SMEs to be listed, this will allow the alternative market to serve its purpose. Also, LuSE should increase awareness and understanding to SMEs about alternative financing opportunities through the alternative market. This could be done by making available material on the importance of listing, inviting potential SMEs to workshops and induction programs on listing Keywords: Alternative Market (Alt-M), Capital Financing DOI: 10.7176/RJFA/13-24-03 Publication date: December 31 st 2022

Analytical and Benchmarking Study of the Impact of Small and Medium Enterprises Sector on Economic Growth from The Perspective of Islamic Economy

The Study aimed to analyze and measure the impact of the small and medium enterprises sector in the Kingdom of Saudi Arabia in achieving economic growth, and to study the nature of the relationship between the growth of the small and medium enterprises sector and economic growth, and the impact of Islamic economic thought in that, It also aimed to analyze the reality and development of the small and medium enterprise sector in the Kingdom, in addition to identifying the policies and initiatives that support the small and medium enterprise sector, with an understanding and analysis of measuring the impact of the growth of the small and medium enterprise sector on economic growth in the Kingdom . To achieve the goal of the study, the researcher relied on the historical and descriptive analytical method. Data were collected from published sources from official authorities and scientific journals. The data was reviewed in a descriptive statistics method. The time range of the study, during the period from 2006 to 2021, was on small and medium enterprises in the Kingdom of Saudi Arabia.The thesis consisted of four main chapters, the first chapter discussed the theoretical analytical framework of the nature of the relationship between the growth of the small and medium enterprises sector and economic growth. The fourth chapter is an analytical study to measure the impact of the growth of the small and medium enterprises sector on the economic growth in the Kingdom.The study concluded with some results and recommendations, the most important of which are: Small and medium enterprises managed to achieve a growth rate of about 5% during 2022 compared to previous years, and their number exceeded 750,000, The majority of small and medium enterprises, in terms of geographical distribution, are concentrated in Riyadh, Makkah, and Sharqiya. The number of workers in micro-enterprises that employ (1-5) workers in the small and medium-sized enterprises sector constituted 26% of the total employees, where the percentage represented 18% of the total employees in the third quarter of 2019. Small and medium enterprises attracted 62% of the appointments made in the private sector. The contribution of small and medium enterprises increased by 45%, bringing their contribution to the economy from 21.9% to 28.7% between the years from 2016 to 2020. The share of small and medium enterprises in government procurement increased from 15% in 2018 to 24% in 2020, with a value exceeding 160 milyar Rial, Saudi SME financing exceeds $22.7 milyar until 2021,The study concluded with recommendations, the most important of which is the need to increase government support for small and medium enterprises so that these enterprises can export or expand externally, while this role is not limited to financing or programs and initiatives to support these enterprises only, but rather expands to include the development of new laws and legislation necessary and keeping pace with the requirements of the times to support These facilities and to facilitate their mission of external expansion

Effect of Financing Decisions on Financial Performance of Small and Medium Enterprises in Nairobi City County, Kenya

Small and medium enterprises play a role in contributing to the development of the economy through job creation, poverty eradication, wealth creation as well as the creation of new businesses. However, SMEs have significantly high incidences of illiquidity and lack of credit access. Over the last two decades, alternative sources of SME financing have emerged and include equity, short-term debt, long-term debt, and internal financing. Nonetheless, despite the availability of these sources of financing, SMEs in Kenya are still experiencing poor financial performance. This study, therefore, sought to investigate the influence of financing decisions on the financial performance of SMEs in Nairobi City County, Kenya. The study sought to determine the influence of equity financing, short-term debt, long-term debt, and internal financing on the financial performance of small and medium enterprises in Nairobi City County. The study sought to determine the moderating effect of firm characteristics on the relationship between financing decisions and the financial performance of small and medium enterprises in Nairobi City County. An explanatory research design was used in this study. The unit of analysis was the top 100 small and medium enterprises in Nairobi City County. Stratified random sampling was used in the selection of 80 SMEs from the target population. This study used secondary panel data, which was collected by the use of a data extraction tool. Analysis of quantitative data was done by the use of inferential and descriptive statistics with the help of statistical software known as Stata version 14. This was followed by inferential statistics which included multivariate regression analysis. The results were presented in figures (bar charts and pie charts) and tables. The study found that equity financing has a positive and significant influence on the financial performance of SMEs in Nairobi City County. The study also established that short-term debt has a positive and significant influence on the financial performance of SMEs in Nairobi City County. In addition, the study established that long-term debt has a positive and significant effect on the financial performance of SMEs in Nairobi City County. Also, the study revealed that internal financing has a positive and significant effect on the financial performance of SMEs in Nairobi City County. The study recommends that the management of small and medium enterprises should make use of equity financing whenever they want to explain their businesses and when they are financing different projects including product development and internal business process improvement. Also, the management of small and medium enterprises should obtain loans from banks, Sacco’s, and microfinance institutions to finance their operations. Moreover, the study recommends that the SMEs in Nairobi City County should avoid obtaining short term loan since these loans have high interest which requires to be paid for a brief period of time and hence may negatively affect the financial performance of the SMES. The study recommends that the management of small and medium enterprises should seek to increase the total assets of their organization so as to enable them to obtain loans from financial institutions to grow their business and improve financial performance.